Aggregate retail lending growth in value terms (balance outstanding in INR) declined from 27.4 per cent in Q1 2018 to around 19 per cent in Q4 2018. Similarly, the rate of growth in volume terms (the number of accounts) declined from 30.2 per cent in Q1 2018 to 20.8 per cent in Q4 2018.
While the pace of growth of retail loans has slowed, the demand for credit products has accelerated due to factors like rising consumerism and the impact of demonetisation. The gap between demand and supply of credit for retail products continued to widen as seen in the declining trend of loan approval rates.
“It is clear there is still significant demand for credit amongst Indian consumers, with enquiries increasing 40 per cent year-on-year in CYQ4 2018. However, supply has not quite kept pace and approval rates have displayed a consistent declining trend from Q1 2017 onward,” said Yogendra Singh, Vice President of data science and analytics, TransUnion CIBIL.
The growth rate of unique consumer enquiries for retail lending products has accelerated from 26.8 per cent in Q2 2018 to 36.2 per cent in Q3 2018, in contrast to aggregate origination trends as well as the economic growth trends. Aggregate approval rates have come down from 43% in Q3 2016 to 40.3% in Q3 2017 and further on to 33.9% in Q3 2018.
“This effect is driven by an increasing percentage of non-prime, higher-risk consumers entering the credit marketplace, and shows lenders are actively managing their risk exposure and thus the profile of their overall portfolio,” said Singh.
The improving risk management is reflected in stable or declining delinquency rates for most retail products, said CIBIL.